Syllabus: GS-III & V: Infrastructure

Why in the news? 

The DPIIT–NCAER “Assessment of Logistics Cost in India” (2023–24 exercise) have highlighted the North-East’s logistics economics. 

More About the News

• While the Centre is accelerating highways, rail links, multimodal projects and cold-chain investments, the report highlights that Northeast-bound cargo faces significantly higher operational costs than outbound cargo — a structural problem that raises retail prices, reduces competitiveness of local produce, and weakens household purchasing power. 
• Policymakers are now focusing on how infrastructure projects (Kaladan, rail freight services, MMLPs, PM GatiShakti interventions) and demand-side measures (industrial incentives such as UNNATI-2024) must be aligned to reverse the persistent “high inbound cost plus weak outbound volumes” trap.

About the cargo bottleneck in Northeast India

The cargo bottleneck refers to a chronic mismatch between high inbound logistics costs (bringing goods into the Northeast) and low outbound cargo volumes (few goods shipped out to national markets). This asymmetry raises per-unit freight for imports to the region, and — because outbound volumes (backhaul) are scant — carriers return empty or under-utilised, keeping unit costs high. The DPIIT–NCAER assessment has underlined regional cost differentials as a policy concern to be resolved for equitable growth.

Why does the bottleneck exist? 

• Difficult terrain & poor last-mile quality: Hilly and riverine topography raises construction and maintenance costs; many feeder roads remain single-lane or seasonal, increasing fuel use and transit time. Studies show freight rates on poor roads can be significantly higher than on all-weather highways. 

• Operational inefficiencies and logistics ecosystem gaps: Shortage of reliable logistics service providers, parking/holding yards, cold-chain facilities, and multimodal transshipment points increases dwell times and handling costs. The absence of efficient cargo aggregation centres and organised freight markets prevents economies of scale. 

• Skilled driver premium and safety costs: Carriers pay higher allowances to drivers experienced in difficult mountain/forest tracks; insurance and risk premiums are also higher on difficult routes — all pushing tariffs up. 
• Paucity of backhaul cargo: Low volumes of outbound consignments mean many inbound trucks/containers return empty, raising the effective per-ton cost of carriage. Without predictable outbound flows, carriers price in the empty-mile risk. This structural imbalance is central to the higher landed cost of goods in the region.
• Limited cold-chain and value-addition capacity: The Northeast produces many perishable horticulture products, but limited cold storage, pack-houses and food processing lock farm-gate produce into low-value, local channels or cause post-harvest losses — reducing volumes viable for long-distance commercial shipment. Subsidy patterns show the Centre gives higher capital support to cold storage in the North-East, recognising the gap. 

Significance of unlocking cargo potential for the Northeast

• Lower consumer prices & higher welfare. Reducing inbound freight lowers retail prices of essentials across remote states.
• Competitiveness of local industry. Better logistics reduces input costs and raises competitiveness for MSMEs and agro-processors in national markets.
• Rural livelihoods and value-addition. Stable off-take channels for perishable and non-perishable produce will increase farmer incomes and enable industrial clustering.
• Strategic & national integration. Improved cargo flows strengthen national supply chains, cross-border trade opportunities (with Bangladesh/Myanmar) and the geopolitical connectivity of the region.
• Macro gains. NCAER–DPIIT’s national logistics assessment places logistics at ~7.97% of GDP (2023–24), so efficiency gains in lagging regions can improve national competitiveness.

Steps taken by the Centre to overcome cargo bottlenecks (with examples)

A. Infrastructure & multimodal connectivity

• Kaladan Multi-Modal Transit Transport Project (KMTTP): maritime + inland waterway + road link via Myanmar to Sittwe and Paletwa; expected to improve sea+river connectivity for the South-West approach to the Northeast (operational target announced for 2027). This will give an alternate, shorter route for some cargo and reduce pressure on overland single corridors.
• Rail freight & dedicated cargo services: Indian Railways and private operators have begun commodity-specific and Parcel Cargo Express services linking Northeast production centres (e.g., Agartala) to markets like Ludhiana and Delhi — examples of efforts to generate outbound volumes. The Agartala–Ludhiana cargo train is a practical step to reduce empty returns and integrate northeastern supply chains with the North Indian hinterland.
• PM GatiShakti, Bharatmala, Sagarmala & MMLPs (Multimodal Logistics Parks): national programmes prioritise multimodal nodes, express corridors and last-mile connectors that benefit the Northeast by linking highways, rail and ports while reducing transit times and handling costs.
  

B. Industrial promotion and demand-generation (creating backhaul)

• UNNATI – Uttar Poorva Transformative Industrialization Scheme (2024): a dedicated central scheme to incentivise industrial investment and manufacturing in the Northeastern states through capital investment support, interest subvention and production-linked incentives — intended to raise manufacturing output and create sustained outbound cargo. Low awareness among MSMEs has been acknowledged as a bottleneck to uptake.

C. Cold-chain & food processing support

• Cold-chain subsidies and PMKSY / NHB schemes: the Centre provides higher capital subsidies for cold storages and agro-processing in the Northeast (e.g., up to 50% support in hilly/NE areas under some schemes). These measures reduce post-harvest losses and enable aggregation of perishable produce for bulk shipment. Promoting solarised cold chains is an emerging policy idea given high electricity costs in many remote districts.

D. Institutional & regulatory measures

• Logistics cost assessment & data framework: DPIIT’s partnership with NCAER to create a robust logistics cost framework (metrics such as cost per tonne-km, regional break-downs) is intended to make policy interventions evidence-driven. Targeted metrics will help track progress in reducing Northeast differentials.

Way forward 

• Demand-led connectivity (connect supply with markets):
  • Use UNNATI to catalyse focused agro-processing clusters, textile/forest-product units and MSME parks that produce goods with predictable demand outside the region — this creates outbound cargo (backhaul).
• Multimodal aggregation & scheduled freight corridors:
  • Establish collection centres + cold hubs + scheduled MMLP-linked trains/river barges so that outbound shipments are reliable and economies of scale reduce per-unit costs. Agartala–Ludhiana cargo trains should be scaled up if utilisation rises.
• Cost-effective cold chain (solar + subsidy convergence):
  • Prioritise solar-powered cold storages (to reduce electricity costs) by leveraging PMKSY/NHB capital subsidies (higher rates for NE). Encourage cluster-level investments so food parks have assured off-take.
• Backhaul marketplace & digital freight matching:
  • Create a digital platform (public–private) for backhaul matching where inbound carriers can pick up outbound consignments; promote aggregator contracts between large buyers and transporters to reduce empty miles. (Globally, matching platforms reduce empty-return costs significantly.)
• Improve last-mile quality & climate-resilient roads:
  • Prioritise climate-proofing of feeder roads and bridges; ensure maintenance budgets for monsoon resilience so transit times don’t spike seasonally. Use PM GatiShakti prioritisation for durable routes.
• Awareness & single-window for UNNATI uptake:
  • Run an outreach drive (district-level camps, link with NABARD/NSIC) so MSMEs and FPOs claim incentives. Performance audit of UNNATI uptake and fast-track processes for matching industry with logistics support are essential.
• Cross-border logistics and regional trade:
  • Finalise protocols and upgrade border transit facilitation (e.g., India–Bangladesh rail/road links, Kaladan utilities) to open export corridors for Northeast manufacturers. Regional trade can generate steady outbound cargo.
• Measure & monitor (data-driven policy):
  • Use DPIIT–NCAER metrics (cost per tonne-km, logistics cost as % of non-services output) to set state-wise targets and publish an annual dashboard to track reductions in Northeast differentials.

Conclusion

Breaking the cargo bottleneck of India’s Northeast requires co-ordinated supply-side investments (multimodal nodes, climate-resilient roads, rail & waterway links) and demand-side interventions (industrial incentives, agro-processing and market linkages) that create regular outbound flows. Infrastructure projects (Kaladan, MMLPs, rail cargo corridors) and schemes such as UNNATI-2024 and cold-chain subsidies move the needle, but success depends on implementation — timely commissioning of projects, active industry uptake of incentives, digital logistics solutions to eliminate empty miles, and a sustained push on cold chain. If the region can convert its agricultural abundance and niche forest/handicraft products into reliably contracted supply for national and international markets, the resulting backhaul volumes will make logistics much cheaper — benefiting consumers, producers and the strategic connectivity of the nation.

Mains-style question (250 words / 15 marks)

“Examine the nature and causes of the cargo bottleneck in Northeast India. Evaluate the extent to which infrastructure projects (rail, road and multimodal) together with industrial incentives like UNNATI-2024 can reduce logistics costs and promote export-oriented growth in the region.”

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